The Avaya Roadmap for Nortel’s Enterprise Unit

This is a guest post by Jeff Wiener, president with Digitcom and writer of The Telecom Blog.

It looks like the Nortel saga is finally drawing to a close and current Nortel customers can now move to new direction with greater clarity.

For those of you not aware, Nortel filed for bankruptcy in January 2009. All of Nortel’s business units went up for sale, almost all having now been sold.

The enterprise unit was sold to Avaya in Sept 2009 with the transaction closing on December 18th, 2009. At that time Avaya promised a new road map to be delivered on January 19th, 2010. The focus of this post is the Avaya small / mid market product line specifically.

I will address the enterprise Avaya Aura strategy in a separate post. Although many of the specifics are somewhat vague, the overall product direction is not.

The Nortel BCM 50, BCM 200, BCM 400, BCM 50 and Norstar will converge / morph into the Avaya IP Office product line some time in 2011. The Norstar and BCM are brands I have personally grown quite comfortable with having sold many Norstar’s and BCM’s over the last 20 years while at Digitcom.ca (although we switched to Avaya in 2005 as our primary product line).

It’s kind of sad to see them go. It’s not all bad news though. Nortel sold millions of handsets over the last many decades. Avaya’s intention is to take a best of breed approach with respect to product development moving forward incorporating the best of Nortel’s BCM and adding that level of functionality into the Avaya IP Office product line.

There will, eventually, be support for some of the Nortel handsets on the Avaya product line although that isn’t expected for some time, and the models of phones to be supported not clear either. Some tentative dates appear to be early 2011 although the specifics of what handsets, how, when, how much remain unclear.

The other bright spot with regards to Avaya’s SMB strategy is the continuation of the former Nortel SCS product line. Nortel launched SCS in February 2009 after they filed for bankruptcy protection, and Avaya intends to continue development and sales of SCS. SCS was formerly known as Pingtel which Nortel acquired in August 2008.

You can read the old Nortel press release here. In search of greater clarity on the Norstar and BCM product direction I went in search of answers to a series of questions.

These questions included: When will the M and T series sets be supported ? Will all M and T series sets be supported ? Will the i2000 series work ? How will they be supported on IP Office ? Will the module be the same price ? Will Nortel’s wireless solutions be supported on IP Office ? If so, how ? Will hot desking work on IP Office if using an M and T series set ? What version of IP Office will support the sets ? What does it mean that you can use Nortel element manager to program an IP Office ? Is all functionality maintained ?

The response I received to the above list of questions was as follows: It is going to take some time for engineering to investigate all the bits and pieces to see what can and cannot be supported. In all fairness, this is a major acquisition that just closed 4 weeks ago and the nature of these questions are quite granular.

It will take some time to provide a clearer response of what, when, how, how much … I’ve sat through hours of Avaya presentations in the last 7 days and am “copy and pasting” verbatim some questions / answers from those presentations: Question: What was the rationale to make the IP Office the platform of the future and the model to support BCM and Norstar features as opposed to the opposite Answer: We have multiple generations of SMB products and have made multiple acquisitions in the past.

The way to give the partner a competitive edge, every time we made an acquisition or changed to a next generation platform we had to make sure that the channel partner was able to retain the relationship with the customer. As a result the IP Office has been the platform we converged and we have a very good process of doing so.

That includes Legend, Partner, Merlin, Ingeral 5, where every time the phones, features, type of management and more, has been converged to IP Office. It protects the investment of the install base. It would be easier to converge to BCM and Norstar on IP Office then the reverse.

There was a question with regards to the Nortel sets that will eventually be supported on the IP Office. The response was as follows: With regards to the sets, we’re currently investigating the T series sets. Some of the other ones with regards to the mobility are being considered, and some of the IP sets are being considered.

The specific models are under investigation. I would look to see how things are being supported when we migrate Partner into IP Office, there will be almost an analagous activity. That’s where we are. With regards to the mobility, the interface is very similar to the T series interface so that is the consideration we have right now.

So I can’t guarantee that we will be there but clearly the mobility offering is very profitable for everyone so that’s something we will have to get our head around really quickly.

Overall, there appear to be many unanswered questions. The product direction is clearer though. Norstar and BCM are gone. Avaya has committed to hardware and software support until 2017, however, the platforms themselves are dead.

There will / might eventually be some investment protection for the handsets although which ones, how, how much still remain unclear.

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  • exNTII

    what about all the switching / routing products. are they discontinued?

  • protosphere

    Nortel saga is finally drawing to a close and current Nortel customers can now move to new direction with greater clarity.

    The Norstar and BCM are brands I have personally grown quite comfortable with having sold many Norstar’s and BCM’s over the last 20 years while at Digitcom.ca (although we switched to Avaya in 2005 as our primary product line).

    It’s kind of sad to see them go.

    the models of phones to be supported not clear

    It is going to take some time for engineering to investigate all the bits and pieces to see what can and cannot be supported. In all fairness, this is a major acquisition that just closed 4 weeks ago and the nature of these questions are quite granular.

    It will take some time to provide a clearer response

    The specific models are under investigation.

    So I can’t guarantee that we will be there

    Overall, there appear to be many unanswered questions.

    how, how much still remain unclear.

    _______________________________________________

    They are sounding more like No-Tell every day =)

    Hackney will give more focus to a new level again, Avaya with questionable financial strength pulls a No-Tell style desperate gamble for declining customers and earnings. Pays dearly for the revnues they add. More revnues to justify more financing?

    Same misleading hype like no better time to buy NoTell, or how 9 out of 10 top 500 fortune companies use NoTell, and what the direction it will take. or it will take time, no guarantees, it is unclear, etc.,…

    $915M to buy plus hundreds of millions of year in payroll costs… how long to recoup this in earnings, not sales

    How many people did they take in light of the tradfitional NoTell PR, that were at the crime scene and hard to find as fraud trials loom …for what I feel is the largest mass orchestrated fraud on the planet… will this come ot haunt them too? Or is Nortel diluting all of this by folding to sweep it under the rug with so many still there and how many at Avaya or with others. Hard to say, they are hard to find? Will this haunt Avaya?

  • protosphere

    wise to abandon…no margins… imagine competing against Cisco

  • TongueInCheek

    Avaya has accepted the Nortel Data Product Plan with emphasis on Ethernet Switching, Survivable Branch and Wireless LAN. It has also been stated that the WLAN OEM agreement with Trapeze will fade away, being replaced with an Avaya designed and built solution.

  • free_agent

    Is this the first publicized roadmap for the continuation of any of the sold Nortel businesses?

  • wasthere

    Cost cutting must be at the agenda with this no growth environment. Next to fall : Alcatel-Lucent ?

    http://www.newsrunner.com/display-article/?eUrl…

  • wasthere
  • TongueInCheek

    The article you reference is interesting but has little relevance to Avaya given they serve a completely different market segment. I haven't seen any 2010 Enterprise Market Reports but I wouldn't expect significant market-side growth. Certain segments, such Security and Unified Communications may grow but who knows on other segments.

    One of the most valuable assets for Avaya is their install base. They need to look after that extremely well for positive results.

  • wasthere

    Very slow rebound in the enterprise market. Data chart here shows forecast sales for routers in 2010 still lower then 2008.

    http://www.infonetics.com/pr/2009/3Q09-Ethernet…

  • random123

    Agreed no margin there.
    Except for Cisco themselves, who dictate an incredible margin cos short sighting companies wont risk touching anything else :)

  • protosphere

    Rather than growth, does the concept of decline escape you?

    The bleeding of losing 30% every time they reported sure sounds scary to me before Avaya bought them.

    One of the very reasons they bought this insatiable and tanking mammoth was due to its customer base, but that too is declining. How will they reduce costs yet again after wasting over a billion including Nortel's manpower in this acquisition.

    They must be pretty sure of themselves because competition like Cisco aren't exactly slouches to lead even further as the greatest benefactor to this merger in my view.

    Look how they bought PEC bought for $448M and it was worth less than half ($200M) literally months later (what is it valued at today as it was sold along with Enterprise for around $900M). They bought growing revenues but declining earnings, the gamble failed, now sold to Avaya with Enterprise and guess who leads the pack…Hackney to bring it to a new level…again… will they pull a BSNL too?

    The writing is already on the wall given Avaya is struggling. If they were a public company, there could be no better stock to short in my view. Good people might look at bigger players. more stable and honest players, to further complicate over the next 18 months that should speak volumes. …we'll see

  • protosphere

    doesn't sound like they were crazy enough to entertain re-entering the router arena

  • protosphere

    you may be right:

    “Today, there are five major telecom gear makers: Sweden's Ericsson, Finnish-German Nokia Siemens Networks, Alcatel-Lucent, Huawei and ZTE.

    But the three smaller vendors might not all survive in their current forms.

    Alcatel-Lucent — which has reported 12 straight quarters of losses since it was formed in a merger in 2006 — is seen as the weakest

    “This year is going to be tougher for these companies than last year,” said Paolo Pescatore, analyst at CCS Insight.

    Telecom operators' sales in mature markets rarely grow fast enough to justify any major investments to shareholders.

    Competition for early LTE contracts is so fierce that prices are being pushed down, with vendors battling for the first major deals which can be used as references to win new orders.”

  • exNTII

    declining during bankruptcy was expected due to uncertainity. with a stable company, these will rebound. customers may need to upgrade but they at least have a second choice.

    I dont think Avaya is struggling as you put it. which vendor with the exception of Huawei, ZTE and Cisco, is not having a hard time. With the Avaya and Nortel products together, I think they do have good value to offer. Depends upon how quickly they move to integrate the companies.

  • exNTII

    so is ERS dead?

  • exNTII

    forgot Cisco. Huawei and ZTE are showing phenomenal growth taking the top spot away in several segments. NSN and ALU I think are going to be in deep trouble soon.

  • exNTII

    you mean they will continue ERS. they cant be serious.

  • TongueInCheek

    Who to believe ….

    You and your doom & gloom predictions for Avaya financial performance

    Avaya CEO that called a 2009 EBITDA of 20% on Tuesday.

  • protosphere

    20%? hahaha
    Nortel declines 30% every time they announce.
    That's a 50% spread in difference… I do not think so TongeInCheeks

    Nortel CEO also called for rosy outllooks too , $20 buying opportunities, to be great co. again, 3 to 5 year turnaround liquidating in the 4th, s etc., even green Hack is at Avaya that CEO promoted than fired…good luck

    See how Nortel decay is contageous?

    And they also said there was no better time to buy Nortel and that 90% of top 500 fortune companies do… if you wanted to believe Avaya instead of me… yet again

    I would do not believe Nortel and this is who they bought, and I do not believe you no offense as I am trying to be civil

    …and what's wrong with my predictions over the last half decade =) hmph… but k, fair enough

    Mind you I thought they would got half as much for Enterprise (500M), not including another 200M max for NGS where I feel they paid a 200M premium in total let alone payroll for 6K employees over 18 months…yikes

    Pasying premiums like Nortel use to do with the very PEC/NGS that is part of this firesale, and Tasman over 10X premium, etc… but who am I…

    Maybe you're right and this will boom contrary to industry outlook but you are definitely right in that I do forecast a gloomy outlook, to recover so much from even this 20% EBT BS earnings forecast. Throw it in my face when it arrives and prove me wrong then but I do not agree beyond my gloom and doom predictions.

  • protosphere

    “I think they do have good value to offer. “

    Sure, Nortel had some great product too.

    However, the name of the game is selling these products.
    In all fairness Avaya does an exponentially better job but for how long now that they have acquired this mammoth burden as earnings are hit but hard… to catalyze declining customer confidence when their competitors position may be taken into account in future purchases and who will be around to support their investments with greater security.

  • protosphere

    I think Avaya is picking up the 8600 (previously known as Passport)

  • MichelangeloF536

    “this 20% EBT BS earnings forecast”

    It wasn't a forecast, it was actual results.

  • exNTII

    ouch.

  • MichelangeloF536

    “this 20% EBT BS earnings forecast”

    It wasn't a forecast, it was actual results.

  • exNTII

    ouch.

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